Investigating mortgage rates not ‘best use’ of resources, consumer body tells MEP

The Competition and Consumer Protection Commission has told Irish MEP Brian Hayes that it does not plan to investigate the standard variable mortgage rates (SVRs) being charged here by lenders as this would not be the "best use" of its resources.

Mr Hayes has campaigned against what he views are “excessive” SVRs being charged by Irish banks since being elected to the European parliament. He wrote to the commission on February 13th, requesting it undertake an inquiry into the issue.

In a response dated March 3rd, Isolde Goggin, chair of the commission, acknowledged that "insufficient competition remains a problem in the Irish banking sector" since the financial crash and the bailout of domestic lenders by the State.

Competition needed

“More robust competition is key to ensuring that keenly priced financial products are available to consumers while allowing the banking sector to achieve a healthy and profitable state,” Ms Goggin said.

But she said the commission “has no current plans to undertake any work in this area”.

To do so is “not considered the best use of our resources given the ongoing structural problems in the Irish banking sector,” she added.

Ms Goggin said this is primarily a matter for the Central Bank and the Department of Finance.

She told Mr Hayes that if he had any evidence of anti-competitive behaviour in the sector, particularly the setting of variable mortgage rates, the commission would “appreciate” it being brought to its attention.

Ms Goggin also noted a case is pending before the Court of Appeal – called the Millar case and involving Danske Bank and the financial ombudsman – that could have implications in terms of the variable rates being charged by banks in Ireland.

Mr Hayes expressed his disappointment the commission would not investigate the SVRs being charged by Irish banks.

“This is the biggest issue facing Irish consumers at the moment,” he said. “There needs to be proper oversight. It would make sense for this independent body, which was set up to defend consumer rights, to conduct an inquiry into variable mortgage rates.”

He noted that the Central Bank recently published figures showing that the average variable rate in Ireland is 1.79 per cent higher than the euro zone average.

“Based on these figures, Irish consumers are paying €1.2 billion more than they should be,” he added. “The average overpayment per borrower is €3,300 per year or €275 per month.

Huge variation

“Why can Belgian or German consumers get a rate of about 3 per cent for a long-term fixed-mortgage product from their bank when Irish consumers have to pay almost 4.5 per cent for a variable mortgage product? All euro zone banks are subject to the same main refinancing rate.”

Mr Hayes said it would not "make sense" for the Department of Finance as the State owns two – AIB and Permanent TSB – of the five main mortgage lenders here and has a sizeable stake in Bank of Ireland.